Arizona allocated $85 million to wrong schools for special-education, low-income students

How does Arizona's method of funding special education impact all students? Reporter Alia Rau explains.

According to an Arizona Republic analysis of data provided by the Arizona Department of Education, the state has misallocated about $84 million over the past four years, giving some schools too much and some too little.(Photo: Charlie Leight/The Republic)

Financial miscalculations by state education administrators have resulted in hundreds of Arizona schools missing out on tens of millions of federal dollars to serve students with special needs and those from low-income families.

According to an Arizona Republic analysis of data provided by the Arizona Department of Education, the state has misallocated $85 million over the past four years, giving some schools too much and some too little.

Superintendent of Public Instruction Diane Douglas last month publicly announced that the state erroneously allocated $56 million in federal Title I funds for low-income students. Last week, she sent a letter to schools notifying them of another problem: $30 million in federal Individuals with Disabilities Act (IDEA) grants over the past three years allocated to the wrong schools.

For some underfunded schools, this may have required them to pull general classroom funds to cover expenses for special-needs services, and prevented them from hiring additional teachers or giving raises.

"The superintendent and (Arizona Department of Education Chief of Staff) Michael Bradley are not taking this lightly," said department spokesman Stefan Swiat. "They are taking an audit found under a previous administration and they are tackling it."

Swiat said the start of both problems dated back to prior superintendents, although the issue with special-education funds wasn't fully assessed by federal officials until this September.

The disclosures from the Arizona Department of Education has fueled the argument from education leaders that they need more money to properly educate the state's K-12 students.

"Our schools have met the needs of their students, yet they haven't had the funding to do so," said Arizona Charter Schools Association President and CEO Eileen Sigmund.

A separate analysis by The Republic last month exposed discrepancies with state funds allocated for students with special needs, showing hundreds of schools got more than they actually spent while hundreds more were forced to spend more than they got.

Federal law requires district and charter schools to provide all services required to educate students with special needs, regardless of how much money they get. As a result, underfunded schools must pull from funds that would have otherwise been spent to educate students without special needs.

Douglas in her letter to schools said the IDEA funding mistakes were discovered in a 2015 audit but "completely solidified" and "fully calculated" during a final federal audit in September.

"Of the roughly $640 million of IDEA grant funds that were disseminated between FY14-FY16, $15.2 million was under-allocated," she said.

The state overallocated an additional $14 million, Swiat said.

Douglas blamed "an incorrect funding formula that became less accurate and an inconsistent mechanism for calculating funding for new and expanding charter schools."

Of the $1.2 billion Title I grants allocated over the past four years, the state overfunded schools $43 million and underfunded schools by $9.7 million, according to an analysis of state data.

Swiat said issues with that funding formula were discovered in a 2014 audit under a prior superintendent. He said staff told Douglas the issue was being resolved "and in fact, it compounded."

He said neither problem began under Douglas and that she now has new staff overseeing the state allocation of these programs.

Special-education funding

Public district and charter schools across the state were among those not properly funded for serving students with special needs over the past three years.

The top underfunded districts include:

Gilbert Unified District, $382,043.

Chandler Unified District, $346,647.

Deer Valley Unified District, $268,326.

Peoria Unified School District, $230,585.

Dysart Unified District, $214,389.

The top underfunded charter schools include:

Arizona Autism Charter Schools, $30,732.

Paragon Management, $28,990.

Horizon Community Learning Center, $27,849.

Juniper Tree Academy, $26,387.

Maya High School, $25,068.

The top overfunded districts include:

Paradise Valley Unified District, $436,302.

Sierra Vista Unified District, $431,423.

Pima Accommodation District, $380,931.

Kyrene Elementary District, $360,035.

Cartwright Elementary District, $306,911.

The top overfunded charter schools include:

Portable Practical Educational Preparation, $748,815.

American Leadership Academy, $495,478.

The Odyssey Preparatory Academy, $291,260.

Legacy Traditional Charter School, $210,917.

AIBT Non-Profit Charter High School, $203,740.

Low-income funding

District and charter schools may use Title I funds in ways that would help improve student achievement, such as hiring a reading intervention teacher or offering extended learning programs after school for math.

Here were the most under- and overfunded district and charter schools combined over the past four years.

Top underfunded district schools:

Red Rock Elementary District, $135,052.

Cottonwood-Oak Creek Elementary District, $104,752.

Clifton Unified District, $82,223.

Oracle Elementary District, $69,349.

Casa Grande Union High School District, $39,499.

Top underfunded charter schools:

Primavera Technical Learning Center, $1.2 million.

Sequoia Ranch School, $1.2 million.

Legacy Traditional Charter School — Maricopa, $830,765.

Espiritu Community Development Corp., $627,898.

Career Success Schools, $356,566.

Top overfunded district schools:

Mesa Unified District, $2.7 million.

Tucson Unified District, $2.6 million.

Phoenix Union High School District, $2.5 million.

Sunnyside Unified District, $1.8 million.

Cartwright Elementary District, $1.6 million.

Top overfunded charter schools:

American Leadership Academy, $323,161.

The Charter Foundation, $268,875.

Tempe Preparatory Junior Academy, $182,422.

Legacy Traditional Charter School, Casa Grande, $156,648.

Legacy Traditional School — Glendale, $156,579.

However, while these were the amounts the Arizona Department of Education allocated, it's not clear how many of these schools actually accepted the funds.

Swiat said not all schools accept the money.

Wayne Porter, headmaster at Tempe Preparatory Academy, said they do not accept Title I funds.

Fixing the problem

Douglas told schools she will submit a proposed solution to the U.S. Department of Education that will include holding harmless the overfunded schools and outlining a three- to five-year process for the state to repay the underfunded schools.

"The superintendent really, really is adamant about letting schools know that our plan is being created to have the least amount of disruption to schools as possible," Swiat said. "We can't take any money from the schools."

The proposed plan would apply to both schools affected by the funds for students with special needs and for those affected by the funds for low-income students.

Douglas in her letter said the state Department of Education has some unused funds it can sweep to repay the underfunded schools, but she warned that it will likely require the department to cut spending for professional development and some other programs.

Swiat said they expect to hear sometime this spring from the U.S. Department of Education about whether to implement the proposed correction plan.

Douglas in her letter said the formula has been corrected for next fiscal year, and that the state agency has had a complete leadership turnover since the initial issue was found.

Sigmund said schools already feel the pinch of funding, and this has just added to it for some of them.

"We make sure we are meeting the needs of all our students, especially special- education students and students living in poverty," Sigmund said. "What we're hearing from schools is they just want to knew when they can get the money for the services they provided."

She said making those schools whole is vital to helping them continue to provide the resources and services their students require.